The Warning Signs of a Failing Billing Company or Revenue Cycle Management Firm

May 2014

By: Mick Raich, President, Vachette Pathology

We have worked with 86 different revenue cycle entities over the past 12 years, from hospital CBO's to large national firms to small firms with only two clients. There are certain trends we see whenever a billing firm is in trouble. In my opinion, here is our list of symptoms that maybe something is wrong.

Increasing account receivables (AR) is often the first sign of trouble. Commonly, we see the AR over 120 edging upward slowly and then settling. We have seen this move from single digits to double digits with several failing firms. Often we hear numerous excuses for this change. Usually this increase is caused by a lack of effort on refiling denied claims. Remember, 16% of all claims are denied and 50% of those are not appealed. Recently a national insurance plan noted they deny 10% of all their claims. We often see an issue when billing companies are purchased or transitioned. Often a firm being sold releases staff ahead of the purchase to make its bottom line look good. Usually the staff members released are the higher paid claims management staff - those who actually work the claims. The thinking is that the rise in AR will not take place until after the purchase.

Poor management reports. We have seen great reports and numerous Crystal Reports but a common symptom of a biller destined to fail is one that cannot produce the basic reporting. We have seen billers that can only produce gross charge and payment reports. This was great in 1990 but the environment is so different now that data is king. Failure to track RVU's and managed care rates are common symptoms of a biller that is behind the curve.

Asking the group for money. If your biller comes to you and requests money to upgrade their billing software or hardware or to help them pay for interfaces, this is a sign of someone who does not keep ahead of the business. This is their responsibility, not yours. If your biller asks you to pay for extras such as credentialing, monitoring, a percentage of collection accounts or to pay more to follow up on a claim, be wary. These arrangements are outside the norm and may indicate a firm that is having a cash flow issue. Also be wary if the biller asks you to invest in the billing firm and become part owner. This causes unique stresses on the practice and the billing firm.

Delayed deposits to your bank account. If the biller is holding your cash a bit longer before making a deposit, this not a good sign. This causes delays in rebilling and makes collections harder.

Not being ICD-10 ready. Like Y2K and other necessary but complicated changes, government requirements seem to separate good businesses from the bad. The next big delineator will be ICD-10. Although it has already been delayed, some billing companies will still not be ready and will have issues.

Failed charge capture processes. It is important to audit your billing. The first thing to look at is the charge capture process, to make sure that all work is being billed, for several reasons. First, this is a major compliance issue. Second, you are losing money. Third, you are paying for malpractice insurance for this work. If you end up in court and the case was not billed, this will look bad.

Not using denial reports. Your denial reports tell you what you need to fix in your billing process. Failing to fix the problems is a sign of a weak process. Failing to have any denial reports is a sign of complacency.

Not being on top of industry changes. If your biller is not attending your industry specific workshops, then you may be missing some very important pieces of the puzzle. I would question the expertise of any "experts" that don't attend these workshops.

Failing to upgrade billing software and maintain billing standards. If your biller is not upgrading their software, what does this tell you? To me it says they are myopic in their business approach and sooner or later this will cost you money. Since there are fantastic software firms producing quality products, the failure to upgrade your infrastructure will cost you in the long run. Today, most billing firms have scanning software, programmers, and electronic work flow software. Most coders work off an electronic screen, and everyone has strong batch totals as part of their billing software. Any biller using a total paper environment is most likely not up to industry standards.

Bad outsourcing. Most billing firms outsource their data entry, interface management and call centers. Some do it well and some not so well. Bad outsourcing is always found when you audit your billing. You find keying errors, claim errors, bad credentialing, accounts being adjusted incorrectly, the wrong allowed amounts being applied, and incorrect secondary billing. Even in the best case, this will cost you some revenue.

In summary, if you see some of these things in your billing or revenue cycle management, then take note. Billing is incredibly hard, with numerous front end and back end variables that must be handled correctly. Add to this industry consolidation, CPT changes and the necessity of publicly traded billing firms to satisfy their shareholders with high profits, and you have the perfect storm for lost revenue.

If you have questions, please contact: Mick Raich, President, Vachette Business Services and Stark Medical Auditing at 866-407-0763.

Mick Raich owns Vachette Pathology and works with pathologists, laboratories and hospitals nationwide in the area of strategic management and revenue cycle management. Mick can be reached at 866-407-0763 or 517-403-0763 or via e-mail at [email protected] or visit www.vachettepathology.com.

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